We’re going to discuss 3 different scenarios, green light that means full speed ahead, trade aggressively. Yellow, wanna be a little bit more cautious about what I’m seeing in the markets and red, which means you shouldn’t trade at all.
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On this week’s Ninja Trader Charting Edge, we touch on the E-mini S&P 500 just like last week but I added 2 moving averages, and how to apply the red, yellow & green light analogy on it.
To start off, on the E-mini S&P 500 the mouth of that Bollinger Bands is open and price is heading in the direction of the top or the bottom I do not step in front of that direction, it’s time for caution. I added the 50 & 100 day moving averages because I wanted to determine if the trend is breaking down on the longer term moving averages, thus potentially accelerating to the downside. So right now with everything taken into consideration, I’d say if price starts ticking below the longer term moving averages we could really accelerate a lot into a bearish looking market.
Divergence in the indexes. Yields popping to recent highs. Gold & Crypto weakening. Hard market for equities & crypto to pull out here. Tells me to stay away from the long side right now as we could see capitulation type moves coming. Looking at the E-Mini Nasdaq 100 it’s a pretty similar picture to the S&P 500, proceed with caution because even though the bull market is still technically intact, but if we fail to hold the 100 day moving average and we start hugging that bottom bollinger band it would be a green light for shorts and a red light for longs.
I’m keeping a close eye on the Micro 10 year bond yields for confirmation on the S&P 500 & NASDAQ 100. Typically, higher yields aren’t good for equities, so if it keep ticking up that would be a good confirmation that the shorting light is turning green. We go over gold and we see that it’s pretty similar to equities but it’s way below the 100 day moving average, thus giving us a green light to be aggressive on the short side. If equities gives us a green light too, that would be a even greener light for gold shorts. And Ethereum, one of my favorite positions is yellow, but about to turn red for longs and green for shorts.
To finish off, I’ll share my final thoughts with a popular tweet between the community on how as a new trader I traded my best when my back was against the wall, but when things were going well I’d lay off. That’s a poor mindset. I had to learn to be a taker of the market’s giving & lay off when the market is taking. This is integral to go from losing to a winning trader.
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Develop Your Edge is a weekly YouTube show hosted by 22-year futures veteran and CME member Anthony Crudele, an ex-pit trader and one of the first to trade the E-Mini S&P. Each week Anthony and his guests discuss what they are doing to Develop Their Edge in trading futures! Past performance is no guarantee of future results